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Overseas joint ventures between higher education institutions

Increasingly, higher education institutions are viewing themselves and their mission on a global, rather than simply a national, scale - as, indeed, are their students and academic staff. As a result, many are considering entering into an international joint venture (JV) or partnership, whether that may be through validation of courses run abroad, franchising, the establishment of branch campuses or strategic partnerships for research. This article looks at some of the potential benefits and risks of international JVs to UK higher education institutions (HEIs).

Benefits of international JVs

Research – International partnerships are often designed to leverage research capabilities from one or more HEIs, carrying the potential for prestigious intellectual and practical advances, as well as attracting world-class students, researchers and academics to the institutions themselves.

Reputation – Establishing an international joint venture can, if managed well, expand the power of the HEI’s brand, so attracting a higher class of student and academic and expanding access to funding.

Opportunities – Students and academics are increasingly aware of the need for an international outlook, and so are demanding the same from their HEIs. The very best may not settle for operating in one country, but may seek to work with institutions that have a global reach and outlook comparable to their own.

Revenue – Whilst often not the primary motivating factor for international JVs, several of the models available carry the potential to accrue substantial revenues from overseas. In a time of cuts and a static domestic market, few HEIs can afford to ignore an extra source of income.

Risks

Reputation – How well do you know your partner institution? The importance of undertaking thorough due diligence in relation to the partner (concentrating particularly on their financial systems, management and governance structure) cannot be overestimated. Remember that, however well drafted your legal agreement, ultimately it is the partner institution that is likely to have day-to-day control over the venture. If anything goes wrong, both your investment and your reputation could be on the line.

Foreign regulation – Do not assume that other jurisdictions operate under the same rules as the UK. Before signing any kind of binding agreement it is worth finding out as much as possible about the regulatory environment in the host country. For instance, some jurisdictions do not allow you to sue a public body even if it fails to comply with its obligations. Have you considered the tax and immigration regime that applies, whether that be to students, staff on secondment, or the JV itself?

UK regulation – Despite the JV taking place almost wholly overseas, UK regulation may still apply. In particular, funding councils and QAA jurisdiction should be considered, and any relevant regulation complied with carefully. It will also be important to ensure that your partner institution is aware of the applicability of any UK requirements, to avoid any misunderstandings in the future.

Financing – International JVs, particularly the establishment of branch campuses and research collaborations, can be expensive. Advisory service HE Global recommends that both the overseas and the UK institution enter into collaborations on the assumption that there will be some shared financial risk.

MOUs – Don’t assume that signing a “heads of terms” or “memorandum of understanding” does not create binding legal obligations. To avoid difficulties later on, ensure that the agreement clearly states that it will not be legally binding, and that it is subject to English law. Remember that other countries may have different rules about such documents, and so never sign anything unless you are confident that you know whether it will bind you.

Governing law – It is vital that any agreements state clearly which law is to apply. The risk is that both parties try to assert their own interpretation, leading to lengthy and costly cross-border legal disputes.

Intellectual property – In research collaborations in particular, consider carefully who will own any intellectual property developed by the JV, and ensure this is clearly documented and agreed. Local laws will also need to be considered, as some will apply automatically.

Disputes – A clearly defined dispute resolution procedure can help to avoid costly, and potentially embarrassing, disagreements being played out on the world stage.

Exits – If the JV is not working, it will be vital to ensure that you are able to exit cleanly and without rancour. A mutually agreeable exit procedure should be agreed upon at the outset in order to manage the risk of the venture.

Conclusion

Once all the difficult questions have been asked and answered, HEIs should ask themselves whether they emerge with a picture that fits with their institution’s brand, reputation and international strategy. Are there any legal or regulatory risks that merit further investigation? There is no shame in walking away. But then again, many institutions will be asking themselves whether they can be left behind in the race for international influence and expansion. For those that decide to embark on international JVs the risks may be great, but with proper due diligence and planning most are able to share in the benefits of an exciting new era in the HE sector.

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